EUROPE DAYAHEAD REUTERS-Uncertainty in Lisbon; Greece unveils budget

October 5, 2015

Portugal’s Prime Minister Pedro Passos Coelho emerged as the winner of Sunday’s general election, which is more than other pro-austerity leaders around Europe have done since the start of the sovereign debt crisis. But his mandate is far from convincing. He will be trying to form a minority government against Socialist rivals who have already explicitly said they cannot be relied upon to back his reform agenda. It does not augur well for political certainty in the country — not one minority administration has managed to go full term since the 1974 overthrow of dictator Antonio Salazar. Coalition negotiations are likely to start today; Passos Coelho has to reach an understanding that will allow the 2016 budget to pass in coming weeks.

Turkish President Tayyip Erdogan is meeting EU officials in Brussels against the backdrop of a Syrian conflict, the European migrant crisis, rising violence in southeast Turkey and his Nov. 1 snap election — enough to chew over. While the EU has raised concerns that he is becoming increasingly authoritarian, it also needs his cooperation to persuade refugees to remain in the region rather than head to Europe. For his part Erdogan, now in full pre-election campaigning mode, will raise Turkey’s stalled EU membership and requests for easier travel and trade with the bloc and the frozen conflict with EU member Cyprus.

The newly re-elected government of Greece’s Alexis Tsipras is seen sticking to growth and fiscal targets as set out in the bailout plan, with the draft 2016 budget unveiled this morning. Finance Minister Tsakalotos then flies to Luxembourg to discuss with euro zone colleagues the reforms Greece must put in place by mid-November to secure vital bank recapitalisation and the next tranche of aid in first bailout review. And Tsipras unveils his four-year programme to parliament in Athens around 1630 GMT; he is due to stick to bailout terms but could push for wiggle room in areas such as labour law, pension reform and VAT.

UK finance minister George Osborne addresses the Conservative Party conference today in a speech that could range beyond his economics brief as he builds on his status as leading contender to succeed David Cameron as PM. Extracts released ahead of time suggest he will unveil a programme to spur investment into infrastructure in Britain –- somewhat poaching a key policy of new Labour leader Jeremy Corbyn.

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